Vauxhall to lose 500 jobs in European restructuring

GM Europe to cut 8,300 staff and invest €11bn to return to profitability

Vauxhall is cutting more than 500 British jobs as part of a massive restructuring that will slash 8,300 staff from the group's European workforce.

The strategy announced yesterday by GM Europe (GME) chief executive Nick Reilly aims to get the struggling firm to break even by 2011 and in profit by 2012. But to do so it needs to cut 20 per cent of its capacity across Europe.

Although there will be no redundancies at Vauxhall's Ellesmere Port car plant, Mr Reilly confirmed that Luton Vauxhall, which makes the Vivaro van, will lose 369 jobs. Another 154 will go from Vauxhall's UK administration.

GME also confirmed that Vivaro production at Luton under a joint venture with Renault will continue until at least 2013, when the agreement runs out, and the company is investigating new business options for the plant thereafter. Ellesmere Port, which started production of the new Astra last autumn, is on track to return to three shifts by the middle of next year.

In total, the restructuring will strip 8,300 staff from GME's Vauxhall and Opel operations. Around half of the job losses will be in Germany – where the company employs 25,000 – and another significant slug will go with the closure of the group's Antwerp factory, which was announced last month.

The plan is designed to re-align capacity with demand. It was put together after the group's resurrected US parent pulled back from the sale of the European operations at the last minute in November. Along with the reduction in staff, the strategy also includes €11bn (£9.7bn) of investment over the next five years, including €1.25bn from GM in the US. Vauxhall/Opel will launch eight models this year, and another four next, and the group will also focus on developing next-generation propulsion systems.

"I am very confident this strategy will help fulfil our mission to be a leading European manufacturer," Mr Reilly said yesterday. "The combination of adjustment and advancement will put the company back on a solid footing."

To fund the plan, GME needs €3.3bn. The US parent company has already injected some €600m, and GME is now touting its plans – signed off by independent auditors Warth & Klein – around European governments to try to raise another €2.7bn. Lord Mandelson, the Business Secretary, has indicated a general willingness to support Vauxhall. But Germany's influential IG Metall union yesterday rejected the plans and called on Germany not to reject requests for €1.5bn in aid.

GME was piling on the pressure yesterday, stressing hard the economic value of manufacturing operations to host nations. "Manufacturing is at the heard of industry nations like Germany and others in Europe," Mr Reilly said. "It gives them strength to weather the financial storms of the globalised economy." He also warned that a depletion of manufacturing capability results in a "brain drain". "Manufacturing must have and will have a bright future in Europe," Mr Reilly said.

Meanwhile Dutch car maker Spyker, which is buying GM's Saab business, has switched production from Holland to Coventry as part of the loss-making group's moves to scale up production and reduce manufacturing costs.